Wednesday, July 16, 2014

The idea that social spending in India is too high would be amusing if it were not so harmful. According to the latest World Development Indicators (WDI) data, public spending on health and education is just 4.7 per cent of GDP in India, compared with 7 per cent in sub-Saharan Africa, 7.2 per cent in East Asia, 8.5 per cent in Latin America and 13.3 per cent in OECD countries. Even the corresponding figure for “least developed countries,” 6.4 per cent, is much higher than India’s. The WDI database does not include social security spending, but the recent Asia Development Bank report on social protection in Asia suggests that India is also an outlier in that respect, with only 1.7 per cent of GDP being spent on social support compared with an average of 3.4 per cent for Asia’s lower-middle income countries, 5.4 per cent in China, 10.2 per cent in Asia’s high-income countries and a cool 19.2 per cent in Japan. If anything, India is among the world champions of social underspending. The view that social spending is a waste has no factual basis either. The critical importance of mass education for economic development and the quality of life is one of the most robust findings of economic research. From Kerala to Bangladesh, simple public health interventions have brought down mortality and fertility rates. India’s midday meal programme has well-documented effects on school attendance, child nutrition and even pupil achievements. Social security pensions, meagre as they are, bring some relief in the harsh lives of millions of widowed, elderly or disabled persons. The Public Distribution System has become an invaluable source of economic security for poor households, not just in showcase States like Tamil Nadu but even in States like Bihar and Jharkhand where it used to be non-functional. Of course, there is some waste in the social sector, just as there is much waste in (say) universities. In both cases, the lesson is not to dismantle the system but to improve it — there is plenty of evidence that this can be done.